1. Value Chain and Business Model Approaches
Improved Food Security through the Commercialization of Agriculture
FAO contribution to Value Chains Methodology
Heiko Bammann, Enterprise Development Officer, AGS
FAO Rome
check:

2. Sequence of presentation:
Value Chains – basic introduction
Inclusive Business Models
FAO support to VC development
Activities and tools supported
Initial lessons learned

3. Value Chain Approach
A value chain is the full range of activities which are required to bring a product or service from conception, through the different phases of production, transformations, and delivery to final consumers and final disposal after use
It is made up of a series of actors from inputs suppliers to producers and processors to exporters and buyers
Aim: to elevate the value chain to ” higher level”
Improve profits

4. Critical Dimensions of a Value Chain
Inputs
Production
Processing
Retailing
Product Flow
Financial Flow
Information Flow
Incentives and
Governance

5. Five Typical Action Areas/Steps
Selection of sector or product, key issues and entry point
Value chain mapping
Participatory value chain analysis
Value chain action planning (draft upgrading strategy)
Stakeholder validation and planning workshops
=> Develop a VC upgrading strategy!

6. Producer-Buyer linkages in VC
Institutional environment (laws, regulations, etc.)
Financial and Information flows
Inputs
Production
Buyer Processor
Distribution
Consumption
Physical flows
Supporting services

7. Inclusive Business Models
Small farmers are increasingly tied to markets and agro-industries through business linkages and alliances with each other and with other value chain stakeholders.
There are many models of business linkages, but three are relevant for small farmers:
producer organisation model
buyer driven model
intermediary model

8. Typical organisation of smallholder production
Type
Driver
Objective
Producer driven
Small-scale producers themselves, through FO’s: ECTAD, CPGC
new markets
higher market prices
stabilize market position
Large farmers
extra supply volumes
Buyer driven
Processors (Hot Mama, BEL)
Exporters (GUY)
Retailers (Super J, SLU)
assure supply
Intermediary driven
Traders, wholesalers and other traditional market actors
supply more discerning customers
NGO’s and other support agencies
‘make markets work for the poor’
National and local Governments i.e. NAMDEVCO, GMC, NWC
regional development

9. Must Be a Business Case for Working with Small Farmers
Business Reasons
Costs and Risks
Smallholders’ comparative advantage (premium quality)
Securing supply
Access subsidized inputs
Corporate responsibility
Community goodwill
Politics
Product quantity, quality, consistency, safety
Traceability & compliance with standards
Loyalty and fulfilment of commitments
Negotiation, coordination and communication

10. Foundations of Sustainable Models
Organized &
empowered
farmers
Facilitating
policy
sector
Receptive
business
sector
Partnership
facilitator

11. Rationale for supporting Business Models
Reduce over reliance on multi-stakeholder participatory approaches
Focus first on key VC problems
Enhance reliability of raw material supply
Enhance competitiveness of agribusiness buyer
Empower real development drivers
Business managers know their markets
SMAEs create value, buy products, generate jobs
Mainstream business thinking

12. FAO – AGS* supported projects
EU All ACP Agricultural Commodities Programme (EU AAACP) – (E)
check:
The Phase II of the CARICOM/CARIFORUM Programme for Food Security - (I)
check:
* FAO Rural Infrastructure and Agri-Industries Division

13. For the Caribbean
Focus on one product (group) and improved value creation
Activities to achieve improved business linkages, production, post-harvest handling, value addition and marketing to local, regional or international markets
Focus on farmers and agribusiness organizations

14. Countries, Value Chains, and ‘Businesses’ supported
BAR – Onion VC – BAS (I)
BEL – Hot Pepper – Hot Mama + (I)
DOM – Pineapples – NIPPA (I)
GRN – Roots and Tubers – NEFO (E)
GUY – Eddoes – GAPA (E)
JAM – Ackee – PO’s (I)
JAM – R&T – CPGC (E)
SLU – Fruits – BVFO, etc. (I)
SVG – R&T – ECTAD (E)
CARICOM – Services - CaFAN (E/I)

15. Overview of the business model approach What are differences?

16. Business models for improved producer-buyer linkages (steps)
Identification of the key driver
Analysis/Characterisation of the current business model
Identification of the critical success factors for buyers
Preparation of an upgrading business model and financing plan
Identify sub-set of activities that project can support without distorting viability, unduly subsidizing, undermining sustainability

17. Characterization of Business Model
Product: products sold, differentiation
Product flow and distribution
Clients: clients, numbers, why buy
Resources and capacities base
Activities: production, transformation, etc.
Key partners and collaboration
Costs and revenue
Expectations

18. Activities and tools supported

19. 1 - Business to Business Coordination
Addressing sources of uncertainty
Implementing contractual arrangements (formal and informal)
Promoting trust, transparency and collaboration

20. 1 - Business to Business Coordination
Possible tools:
Information mechanisms to improve transparency
Workshops to identify bottlenecks and better understand on each other’s role
Strategic plans for management of the chains operations
Training in negotiating skills and developing contracts

21. 2 - Respond to Customer Needs
Ensuring processes and products respond to customers’ needs
Synchronize product delivery and logistics
Improve information on customer requirements
Implement quality and safety standards

22. 2 - Respond to Customer Needs
Possible tools:
Market appraisal and surveys
Train in good agriculture practices and post-harvest and handling
Train in agro-processing and value addition
Train in standards and certification processes
Develop product quality and safety grading systems

23. 3 - Add Value by Managing Processes
Identify and address logistics constraints
Appraising business to business processes
Developing organizational innovations that improve delivery times
Reducing waste and protect the environment from harmful production and processing

24. 3 - Add Value by Managing Processes
Possible tools:
Mapping exercises and workshops to understand the flows
Appraise financial institutions and support loan applications
Train in bulk buying and collective marketing
Introduce switch to re-usable items
Training in business, financial management and marketing skills

25. Relevance of this approach for the Caribbean?
Comparative advantage in production
Import substitution
Ability to absorb external price shocks
Receptive value chain actors
-> contribution to Food Security through the Commercialization of Agriculture

26. Initial lessons learned
Change of mindset for agricultural development required (define roles)
Good management practices are critical!!!
Transparency, accountability and trust
private sector vs public sector
Business development services
rather new in the agriculture sector
expensive for small number of beneficiaries
Time dimension
business success requires time
learn from failures
look for successes and learn from champions
Involve regional partners from the start (CARDI, CaFAN, CABA, etc)

27. Thank You ! 27